The globally distributed ectoparasite Varroa destructor is a vector for viral pathogens of the Western honeybee (Apis mellifera), in particular the Iflavirus Deformed Wing Virus (DWV). In the absence of Varroa low levels DWV occur, generally causing asymptomatic infections. Conversely, Varroa-infested colonies show markedly elevated virus levels, increased overwintering colony losses, with impairment of pupal development and symptomatic workers. To determine whether changes in the virus population were due Varroa amplifying and introducing virulent virus strains and/or suppressing the host immune responses, we exposed Varroa-naïve larvae to oral and Varroa-transmitted DWV. We monitored virus levels and diversity in developing pupae and associated Varroa, the resulting RNAi response and transcriptome changes in the host. Exposed pupae were stratified by Varroa association (presence/absence) and virus levels (low/high) into three groups. Varroa-free pupae all exhibited low levels of a highly diverse DWV population, with those exposed per os (group NV) exhibiting changes in the population composition. Varroa-associated pupae exhibited either low levels of a diverse DWV population (group VL) or high levels of a near-clonal virulent variant of DWV (group VH). These groups and unexposed controls (C) could be also discriminated by principal component analysis of the transcriptome changes observed, which included several genes involved in development and the immune response. All Varroa tested contained a diverse replicating DWV population implying the virulent variant present in group VH, and predominating in RNA-seq analysis of temporally and geographically separate Varroa-infested colonies, was selected upon transmission from Varroa, a conclusion supported by direct injection of pupae in vitro with mixed virus populations. Identification of a virulent variant of DWV, the role of Varroa in its transmission and the resulting host transcriptome changes furthers our understanding of this important viral pathogen of honeybees.